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One of the most important aspects of currency is the differences between hard and soft currency. In this paper, I will analyze the differences of the two and debate the relationship between them.

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Introduction

Hard and Soft Currencies Michael Jack MGT448: Global Business Strategies Instructor: Ed Miller April 15, 2006 Abstract For thousands of years people have used money to buy, barter and trade for goods and services. The Greek empire and various trading partners were the first to use coins as monetary value which strengthened the economy and improved the quality for life for their society (us.rediff.com). Today, with virtually all countries in the world having their own currency, there are many things to know in terms of how the different currencies are exchanged, traded and spent. One of the most important aspects of currency is the differences between hard and soft currency. In this paper, I will analyze the differences of the two and debate the relationship between them. Let us first start out with the text book definition of hard currency. Hard currency can be defines as currency in which investors have confidence, such as that of a politically stable country with low inflation and consistent monetary and fiscal policies, and one that if anything is tending to appreciate against other currencies on a trade-weighted basis. ...read more.

Middle

Spain and Germany tried with complete economic failures. All currency goes through different levels of inflation, what is important that hard currency will depreciate less then the currency in other countries. Through much experience, the American government has done a good job of controlling inflation using both monetary and fiscal policy. Due to America's continued stability in terms of its government, military and societal demands; the American dollar continues to be one of the strongest currencies in the world. America's sustained involvement on the world stage in terms of political and monetary issues hopefully will and has secured a strong future for the American dollar. There have been many instances where other countries have discarded their failing currency and have taken a hard currency as its national currency, usually by pegging their currency to the US Dollar, China has just recently stopped doing this. Other strong currencies of the world are the Swiss Franc, the British Pound and the Japanese Yen. American currency is considered stable and it is used world wide for business deals and ventures. ...read more.

Conclusion

Such poorer nations are condemned to employ other nation's currencies or soft currency of their own. Once they use soft currency, poorer nations often try to harden it by using soft currency (cheap money) to motivate higher production from year to year and high rates of savings. There are many factors such as political, social, economical and military stability that play a part in making a currency hard. A country which produces hard currency has many advantages over those countries that do not. Possessing hard currency makes it much easier to do business world wide. It can be equated to have a good credit score and shopping for a car. You will be much more likely to not just get the car, but get it for cheaper with a good credit score. Countries like Japan, Brittan, European nations and America all have taken full advantage of printing hard currency and have thus enjoyed being major economic powerhouses. The new global business environment will show overtime how shifts in power will affect these and other economies. ...read more.

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